The contribution of the Australian live export industry

The contribution of the Australian
live export industry to the Australian
red meat industries and the regions
ABARE-BRS Outlook 2001
Prepared by:
Derek Quirke
Centre for International Economics
2 March 2011
The contribution of live exports
Total export value averaged $1 billion
These exports provide significant flow-on
benefits to livestock producers
Between 2005-06 to 2008-09
And regional economies
Because of the costs of
Acquisition of livestock; and
– Their transport and preparation
Importantly, the live trade provides access to
alternative markets to processing chain
Key destinations…
Indonesia remains the most important market,
primarily for feeder steers
Accounting for 69% of total head exported
– The Philippines and Malaysia have declined as markets
as the result of competition from South American beef
and Indian Buffalo
Sheep exports have stabilised around core
markets including
Kuwait (25%), Saudi Arabia (24%) Bahrain and Jordan
Malaysia remains a key market for live goats
accounting for 82% of exports
The live trade has resulted in…
Productivity improvements in the northern
cattle at a much faster rate than the rest of
Increases in land values for both northern and
southern beef enterprises
A range of other regional benefits including:
Higher farm incomes than otherwise the case; and
– Reduction of risk through access to more markets
Purchases of livestock…
Exports of feeder or slaughter cattle and
sheep accounted for 90% of total
Over average 74% of the export value is the
purchase of livestock from saleyards or
directly off-farm
The remainder being goats, and breeding cattle and
In farm level GVP terms this is worth $742 million each
This doesn’t account for the flow-on to the
wider livestock industry
And where they are located
It is well known that the live trade is vital to
regional Australia
Live cattle particularly important to the
northern pastoral zone
Currently very limited processing facilities
– Transport south and east becoming more important
Live sheep purchased from southern WA
through to SA and Victoria
Dairy heifers important for Victoria – otherwise
would be slaughtered as calves
How the flow-on was calculated…
Its also widely acknowledged that farm gate
returns would be lower without the trade
By how much?
This requires estimation of the next best use
Returns ‘without’ the export trade
– This would be sales through the processing sector
– Many require additional transport and feeding
The difference between the ‘with’ and ‘without’
indicates the ‘value of the trade’
Additional transport costs and
slaughter capacity very important
Without the trade, an additional 520,000 cattle
would need to be transitioned for processing
Mainly east to Queensland from the NT; and
– South to Perth from NW Western Australia
Under current market conditions, sufficient
capacity exists for their processing
Therefore transport is the major cost
Accounting for an additional $80 million or
– Between 40 and 45 c/kg lw basis
…transport costs continued…
The major impact on sheep would be in WA
From 2006-09, 2.96 million older sheep would be
exported and 5 million sheep slaughtered each year
Around 80 per cent of exported sheep are
from WA
Without the trade potentially means a 60% increase in
sheep for slaughter
– With 20% or 1 million head excess slaughter capacity,
Around 2 million older sheep will need to be
transported east for processing
At an additional cost of $25 per head or $48 million
…using the GMI model
This impact was estimated using the MLA’s
Global Meat Industries (GMI) model
Of Australian meat production, consumption and trade
– Indentifies for 22 global regions and 8 types of livestock
and meat
– Including those important for live exports including
Indonesia and the Middle East
This impact was estimated by
Diverting these livestock back through the processing
sector; and by
– Recognition of additional transport and feeding required
to access processing markets
Impact on national prices…
Without the trade, saleyard prices would be
4% or 7.8 c/kg liveweight lower for grass fed cattle
7.6% or 12 c/kg liveweight lower for lambs
17.6% or 14.6c/kg liveweight lower for older sheep
Impacts on regions will be greater
Fall in farm gate returns
Ac/kg lw
Grass fed cattle
Grain fed cattle
… on production and exports…
Diversion through processing would result in
Beef production increasing by 5.1% or 109 kt cwe
– Sheepmeat production by 14.6% or 100 kt cwe
The majority of this production would end up
in price sensitive export markets
Including Japan, Korea and the United States
– Some to the Middle East and Indonesia
But this diversion drives export returns down
compared to the ‘without’ live exports case
… on industry GVP and incomes
Without the live trade: GVP would have been
2% or $176 million lower for beef
– 5.9% or $119 million lower for sheep
In value added or income terms this equates
to $126 million across the red meat chain
For other live exports: the contribution was
$34 million for live dairy heifers; and
– $4 million for the goat industry
Estimates used a conservative approach
The total contribution is significant
Between 2006-09 across all live exports the
contribution each year was
$248 million in GVP terms; and
– $110 million in value added or income terms
These impacts would be acute across
northern beef and the WA sheep industry
Results are lower than previous studies
More conservative assumptions around transport
– Significantly higher sheep prices observed under current
market conditions
Key drivers of the results
Limited substitution between slaughter
animals and boxed meat in key live export
markets – each market has a range of
Mainly due to cultural practices around fresh
consumption, acceptance of boxed product and end use
– Lack of other quality suppliers from other countries
– These factors could be changing slowly
The supply response of producers to lower
prices and higher transport costs
This extent of this response has been debated widely
Key drivers continued
Depends on scope to move out of livestock
into alternative enterprises
This is a critical issue for Northern beef which has
restructured itself around the live trade
– This is very limited in the short to medium term because
of lack of alternatives
Declining flock numbers in WA used as
rationale for declining importance of the trade
Sheep numbers have stabilised as a result of high
prices and diversification away from grains
– Continued role for sheep and live exports in WA
Bottom line on the contribution
The live export trade has made, and will
continue to make, a significant contribution to
The Australian red meat industry; and
– Regional economies
This continued contribution depends critically
Continued access to export markets
– The performance of the rest of the red meat chain
including processing which depends on exchange rate
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